Evaluating the dynamic employment effects of training programs in East Germany using conditional difference‐in‐differences

This study analyzes the employment effects of training in East Germany. We propose and apply an extension of the widely used conditional difference‐in‐differences estimator. Focusing on transition rates between nonemployment and employment, we take into account that employment is a state‐ and duration‐dependent process. Our results show that using transition rates is more informative than using unconditional employment rates as commonly done in the literature. Moreover, the results indicate that due to the labor market turbulence during the East German transformation process the focus on labor market dynamics is important. Training as a first participation in a program of Active Labor Market Policies shows zero to positive effects both on re‐employment probabilities and on probabilities of remaining employed with notable variation over the different start dates of the program. Copyright © 2008 John Wiley & Sons, Ltd.